Convention Centers' Economic Benefits

GGD/AIMD/OCE-98-71R: Published: Feb 27, 1998. Publicly Released: Feb 27, 1998.

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Pursuant to a congressional request, GAO reported on the economic benefits that convention centers provide to local economies and the estimated cost and funding for the proposed new convention center in Washington, D.C. focusing on: (1) literature on the economic benefits of and factors needed for successful convention centers; (2) whether selected convention centers have achieved some of their projected benefits: (3) the estimated cost and financing plan for the proposed convention center in Washington, D.C.; and (4) the methodology and assumptions used and the economic impact projections made in the economic impact study of the new D.C. convention center.

GAO noted that: (1) according to the literature, the number and size of convention centers in the country have continued to grow over the last 10 years; (2) convention centers are generally not expected to make a profit on their operations or cover their construction costs; (3) cities and sometimes states subsidize convention centers because they expect that the centers will attract out-of-town delegates, whose spending on hotels, restaurants, and shopping will yield additional tax revenue, which will offset the debt service for the construction and operational costs of the convention centers not covered by operating revenues; (4) all five centers in GAO's case studies had operating losses in the most recent year for which data were available; (5) for three of the five convention centers, GAO was able to estimate indicators' of the centers' actual economic impact for the same year the economic impact projections were made; (6) two of these three centers (New Orleans and Baltimore) exceeded their economic projections for the year reviewed, while the third (the existing D.C. center) fell short of its projections; (7) the economic impact projections for the other two centers in GAO's case studies were made in 1998; (8) for these two centers, GAO compared the latest available estimated actual indicators of the centers' economic impact, which were for 1997, to the projections for 1998; (9) one center (Dallas) exceeded the 1998 projections in 1997; (10) the other center (Los Angeles) was short of the 1998 projections, but according to center officials, they expect to meet the economic projections within 3 to 5 years; (11) the methodologies used in the economic impact analyses for the centers reviewed were not always comparable; (12) GAO reported the different methodologies used to make the economic impact projections, but did not asses the validity of the different methodologies, nor did GAO try to equalize the methodologies; (13) the proposed new convention center in Washington, D.C. is expected to have 730,000 square feet of exhibition space and is currently estimated to cost $737 million to develop, construct, and finance; (14) the Washington Convention Center Authority (WCCA) plans to borrow the majority of the funds to finance the construction by issuing revenue bonds backed by existing dedicated tax revenues; (15) WCCA has developed a plan to obtain funding for the entire project; (16) however, there are a number of approvals needed for WCCA to obtain funding before construction can begin; and (17) construction is expected to begin in September 1998 and be completed in May 2002.

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